5 MedTech Stocks Poised to Trump Earnings in Q4
The initial fourth-quarter earnings releases unveil a challenging macro picture, which continues to impact top and bottom-line growth. Overall, earnings for the S&P 500 index are expected to be down -6.8% year over year based on a 4.6% decline in revenues.
Most of the sectors are going through a rough phase, with Oil/Energy bearing the heaviest blow. On the other hand, medical is one of the few sectors in the S&P 500 that is expected to report growth in Q4. We believe the meaningful growth in medical will be primarily driven by the resiliency of the MedTech industry against market volatility.
MedTech’s steady earnings trend reflects a strong product cycle and continuing innovation across different markets. Through partnerships and strategic acquisitions, the firms in the industry are constantly expanding their total addressable market and growth prospects.
How to Make the Right Pick?
With the existence of a number of industry players, finding the right stocks that have the potential to beat earnings estimates could pose a difficult task. Our proprietary methodology, however, makes it fairly simple for you. You could narrow down the list of choices by looking at stocks that have the combination of a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP.
Earnings ESP is our proprietary methodology for determining stocks that have the best chance to surprise with their next earnings announcement. It provides the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
5 Stocks Set to Beat Earnings
Given below are five MedTech providers that have the right combination of elements to post an earnings beat this quarter:
Accuray Inc. (ARAY) – Sunnyvale, CA-based Accuray designs, develops and sells CyberKnife and TomoTherapy Systems that are used to treat tumors. In recent times, gross order growth has been driven by growing traction of these systems. The company expects to sustain the momentum in the rest of fiscal 2016.
Accuray currently sports a Zacks Rank #1 and has an earnings ESP of +100%. The company will report second-quarter fiscal 2016 results on Jan 28.
Abiomed Inc. (ABMD) - Headquartered in Danvers, MA and founded in 1981, Abiomed is well known from its Impella product portfolio that assists or replaces the pumping function of the failing heart. Abiomed currently carries a Zacks Rank #2 and has an earnings ESP of +6.25%.
Abiomed provided impressive preliminary results for the third quarter of 2016. U.S. patient usage is expected to improve 45%, which reflects accelerating Impella utilization rate. The company will report third-quarter fiscal 2016 results on Feb 4.
T2 Biosystems Inc. (TTOO) - Lexington, MA-based T2 is an in vitro diagnostics company. Its proprietary T2 Magnetic Resonance platform (T2MR) enables rapid detection of pathogens, biomarkers and other abnormalities in a variety of unpurified patient sample types. T2MR is used to diagnose samples collected from patients treated for sepsis, hemostasis and Lyme diseases.
The stock holds a Zacks Rank #2 with an earnings ESP of +3.28%. The company is expected to announce its fourth-quarter results on Feb 16.
DENTSPLY International Inc. (XRAY) - Headquartered in York, PA, DENTSPLY is a global leader in providing dental products and consumable medical device products. DENTSPLY’s planned acquisition of Sirona Dental will make the combined entity a leading global manufacturer of professional dental products and materials.
The merger is expected to deliver annual pre-tax synergies of more than $125 million by the third year of deal closure.
DENTSPLY currently carries a Zacks Rank #3 and has an earnings ESP of +1.54%. The company is expected to report fourth-quarter 2015 results on Feb 17.
Zimmer Biomet Holdings Inc. (ZBH) – Warsaw, IN-based Zimmer Biomet is a leading musculoskeletal healthcare company that designs, manufactures and markets orthopedic reconstructive products. Zimmer’s acquisition of Biomet Inc. has enabled the combined entity to emerge as the leading innovator in the $45 billion musculoskeletal industry.
Net synergies from the merger are anticipated to reach $350 million in pre-tax by the end of the third year, post the transaction. The company also expects the merger to contribute 95 cents to $1.05 to adjusted earnings with $135 million of pre-tax, net synergy savings in the first year of the acquisition.
The stock holds a Zacks Rank #3 with an earnings ESP of +0.98%. The company is slated to announce its fourth-quarter financial numbers on Jan 28.
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